While I was trying to make that work, I ordered a usbasp from Hobby King just in case I couldn't figure out the Arduino.
Since the Arduino is used for other things, I started using the USBASP since I had it. Everyone who has one probably knows you get the SCK error every time you use it and everyone says you can ignore it...
But what if you don't want to ignore it?
Do you have an Arduino? Then get rid of that error!

Here's what I did:
First up, load up the ArduinoISP sketch (I used the one that came with Arduino IDE v1.01)
Unplug the Arduino and connect up the relevant pins to the appropriate sockets (I used the 6 pin connector that came with the USBASP from Hobby King) :
USBASP : Arduino Uno
1 : 12 (MISO)
2 : +5V (VCC)
3 : 13 (SCK)
4 : 11 (MOSI)
5 : 10 (RST)
6 : GND (GND) Check (with a multimeter) that you have the wires connected to the right (labelled) pins on the USBASP!
Make sure the "power" jumper is still connected on the USBASP otherwise it wont get powered by the Arduino.
Finally, you need to connect the "RESET" pin on the chip on the USBASP with the RESET line on the 10 pin connector to allow it to be programmed: You may have noticed in the first image above, I just used an alligator clip to short the two solder points.
Download the latest 2009 firmware from the original web site
(see replies below about reset issues with the latest firmware)
Next, plug in the Arduino and then use avrdude (I used the one that came with eepe) to read the existing firmware to a file for safe keeping:
avrdude -p m8 -b 19200 -c avrisp -P com2 -U flash:r:usbasp.atmega8.hobbyking.hex
Finally, Flash the downloaded firmware into the USBASP:
avrdude -p m8 -b 19200 -c avrisp -P com2 -U flash:w:usbasp.atmega8.2011-05-28.hex
avrdude -p m8 -b 19200 -c avrisp -P com2 -U flash:w:usbasp.atmega8.2009-02-28.hex
In both cases, make sure the port specified (com2 in my case) is the port you used in the Arduino IDE to download the sketch to your Arduino in the first place.
DISCLAIMER: This worked for me - If you break your USBASP, I take no responsibility. I'm happy to update these instructions if something is not clear or proved to be incorrect.
EDIT: Corrections for firmware version.